Paycheck Chronicles

2017 Military Retirement COLA


The 2017 Cost of Living Adjustment (COLA) for military retirement and benefits from the Department of Veterans Affairs (VA) will be 0.3%.

Yesterday, the Bureau of Labor Statistics announced the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, for the period ending 30 September 2016.  There is good news and bad news in the fact that the increase is just 0.3%.

The bad news is that recipients of federal benefits such as military retirement pay, Social Security, and disability compensation from the VA will receive only a 0.3% increase in their benefits.

The good news is that this means that overall inflation is still quite low.  Unfortunately, the CPI-W, to which these benefits are tied, does not actually reflect the spending of a typical retiree.  The average retiree spends less on transportation, clothing, and food than the "average" CPI-W imaginary person, but spends significantly more on health care and housing.  The markedly lower gas prices are one of the main reasons that CPI-W was so low.  There is a more appropriate CPI available, the CPI-E, Consumer Price Index for the Elderly, but it is experimental not currently used for such calculations.  The CPI-E pretty consistently shows higher increases in costs for the things that retirees are buying. Many lobbying groups would like to see retirement and similar benefits pegged to the CPI-E instead of the CPI-W.

Increases in military retirement pay will vary depending on the rank, time in service, and date of retirement, but may range from around $10 per month up to $30 per month.  VA disability payments will also increase a varied amount depending on the amount of disability and family size.

It is important to remember that while military retirement pay has historically increased at the same rate as other federal benefits such as Social Security, it is not automatically linked.  Each year, Congress must vote to increase military retirement pay.  This is the second major issue that many people would like to have changed.

It is unfortunate that the increase is so small, but it is calculated exactly as the law provides.  If you're unhappy about it, I encourage you to contact your elected officials about changing the underlying formula, or join a lobbying group such as AARP to find out how you can help their efforts to change the rules.

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